Texas Ag Exemption: How Agricultural Valuation Works for Land Buyers

The "Texas ag exemption" is really two different things, and land buyers often confuse them. The first is a property tax appraisal: qualifying open-space land is taxed on its productive agricultural value instead of its market value. The second is a sales tax exemption: farmers and ranchers with a Comptroller-issued Ag/Timber Number can buy certain equipment and supplies tax free. This guide explains both, what changed for buyers on January 1, 2026, and what to check before you close on land that carries an ag valuation.

By Joseph Stancil, REALTOR® since 2012, Paragon Realty Group, brokered by eXp Realty, LLC (TREC broker license #603392). Texas Sales Agent License #760204.

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Part 1: Agricultural appraisal for property tax ("1-d-1")

It is a valuation, not an exemption

Article VIII, Section 1-d-1 of the Texas Constitution allows open-space land devoted to farm, ranch, wildlife management or timber production to be taxed on its productive capacity. The details are in Chapter 23, Subchapter D of the Texas Tax Code. Under Section 23.52, the appraisal district values the land "using accepted income capitalization methods applied to average net to land," and that value "may not exceed the market value." The land is still taxed; it is taxed on a lower base.

What qualifies

Section 23.51 defines qualified open-space land as land "currently devoted principally to agricultural use to the degree of intensity generally accepted in the area" that has also been in agricultural use or timber production "for five of the preceding seven years." Agricultural use includes, among other activities:

• raising crops, livestock, or exotic animals for food or fiber;
• floriculture, viticulture and horticulture;
• wildlife management (see below); and
• beekeeping, on land that is "not less than 5 or more than 20 acres."

Is there a minimum acreage?

The Tax Code sets no statewide minimum for most agricultural uses. The test is "the degree of intensity generally accepted in the area," and each county's appraisal district publishes its own guidelines for stocking rates, crop practices and tract sizes. That is why the same 10 acres might qualify in one county and not in the next. Check the appraisal district guidelines for the county you're buying in; our county guides for Williamson, Travis, Hays, Bastrop and Burnet link to each appraisal district, and the Rural Land Rules Index compares them.

Wildlife management use

Land already appraised as agricultural or timber land can convert to wildlife management if the owner actively uses it in at least three of seven ways listed in Section 23.51(7): habitat control, erosion control, predator control, supplemental water, supplemental food, shelters, and census counts. Under Section 23.521, Texas Parks and Wildlife sets the standards, which may include a minimum tract size and a written management plan; see TPWD's agricultural land and wildlife management resources. Our guide to Texas hunting ranches for sale covers wildlife valuation in more depth.

How and when to apply

Under Section 23.54, the application goes to the county appraisal district on the Comptroller's form, and it "must be filed before May 1." The chief appraiser may extend the deadline up to 60 days for good cause. A late application filed before the appraisal review board approves the records can still be accepted, but Section 23.541 imposes a penalty of 10% of the difference between the tax at agricultural value and the tax at market value. Forms are on the Comptroller's property tax forms page.

What changed for buyers on January 1, 2026

Historically, a change in ownership meant the new owner had to file a new application. House Bill 1244, effective January 1, 2026, amended Sections 23.54 and 23.541. Ownership is now not considered to have changed for this purpose when the land passes to a surviving spouse, or when the new owner uses the land "in materially the same way" and that use is "overseen or conducted by the same individuals" as the prior year. For example, the same tenant rancher keeps running the same cattle operation.

In that situation, a late application is also allowed without the 10% penalty. It can be filed up to the later of the tax delinquency date or the first anniversary of the transfer. If you're buying land and the operation will change, plan to file a new application before May 1.

The rollback: additional tax on a change of use

If land appraised under this subchapter changes to a non-agricultural use, Section 23.55 imposes an additional tax. It equals the difference between the taxes imposed and the taxes at market value "for each of the three years preceding the year in which the change of use occurs." It applies only to the part of a parcel that changes use. Building a home on part of a tract, subdividing, or simply stopping agricultural use can trigger it.

Two points for buyers:

• Who pays. The tax becomes a lien on the land. Under the rollback-tax paragraph of the TREC Farm and Ranch Contract, additional taxes caused by "this sale or Buyer's use of the Property after closing" are the buyer's obligation, and those caused by the seller's change in use before closing are the seller's. That obligation survives closing.
• Lenders. Section 23.58 bars a lender from requiring you to waive agricultural appraisal as a loan condition.

Part 2: The sales tax exemption (Ag/Timber Number)

The Texas Comptroller issues the Ag/Timber Registration Number to farmers, ranchers and timber producers who raise agricultural products for sale. With it, you can buy qualifying items tax free by giving the retailer an agricultural or timber exemption certificate. Qualifying items include fencing materials and gates for livestock, tractors and implements, feeders and water troughs, and irrigation components used to produce agricultural products for sale.

Key rules from the Comptroller:

• "Agricultural and timber producers are not exempt entities, and not all purchases they make are exempt."
• Items must be used "100% of the time in a commercial farm or ranch in the production of agricultural products for sale"; otherwise the exemption is lost and tax, penalty and interest are owed.
• "Ag/Timber Numbers must be renewed every four years… Renewed and new Ag/Timber Numbers expire Dec. 31, 2027."

Having an Ag/Timber Number does not put your land under agricultural appraisal, and agricultural appraisal does not give you an Ag/Timber Number. They are separate programs run by different offices: the Comptroller for sales tax, and your county appraisal district for property tax.

Buyer checklist for land with an ag valuation

1. Pull the appraisal district record: market value, agricultural value, and the category of use.
2. Ask the seller who conducts the agricultural use (owner, tenant or lessee) and whether that will continue after closing, given the 2026 change-of-ownership rule.
3. Get a copy of any grazing or hay lease and any wildlife management plan.
4. Read the appraisal district's agricultural guidelines for your county.
5. Decide in the contract who pays any additional tax if use changes.
6. If you'll build, estimate the additional tax on the homesite acreage before you close.
7. Calendar the May 1 application deadline if a new application is needed.

For more on rural due diligence, including water, wells, septic and surveys, see our ranch and land guides, the guide to South Texas ranches, or contact Paragon Realty Group about a specific tract.

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Joseph Stancil, TX License #760204, Paragon Realty Group, brokered by eXp Realty, LLC, TX Broker License #603392. General information, not legal, tax or financial advice; confirm eligibility with the county appraisal district and a tax professional. Statutes quoted as published by the Texas Legislature on November 6, 2026. Images are AI-generated illustrations, not photos of specific properties.